Brace yourself: 2009 likely to be worse than 2008, economists say

By John Schmidof the Journal Sentinel

 

Think 2008 was bad? From Washington and Wall Street to the internal forecasts at Wisconsin Energy Corp., economists uniformly expect 2009 to be worse.

"I wouldn't trust any forecast that showed any recovery before the third or fourth quarter," said J. Michael Collins, a professor who specializes in consumer psychology at the University of Wisconsin-Madison.

The slump of 2008 will spill over into the first half of 2009 with such severity that Morgan Stanley & Co. expects the total output of goods and services in the United States to shrink 1.9% by the time 2009 ends. That follows positive but weak U.S. growth of an estimated 1.2% in 2008, although all of last year's growth took place in the first half.

Consensus Economics Inc., a British firm that surveys economists around the world and averages their forecasts, expects the U.S. economy to contract 1.3% this year. In November, the International Monetary Fund projected that the U.S. economy would recede 0.7% - and it expects to revise its 2009 forecasts downward again later this month.

"The economy a year from now will be smaller than it is now," said Lawrence Mishel, president of the Economic Policy Institute, a Washington, D.C., research group.

By 2010, most forecasts move back into positive territory for the start of what many expect to be a gradual recovery.

Unlike other postwar recessions, this one is globally entrenched.continue reading